Brokers are unaware of the “sheer size” of the non-conforming market, according to research from a leading non-conforming lender.
Independent research into the non-conforming market, commissioned by Pepper, revealed that more than half of non-conforming borrowers are missing out on obtaining finance.
The non-bank, which specialises in providing alternative finance, presented this research to brokers and aggregators in its national education program – the Pepper Insights Roadshow. Attended by almost 900 brokers, Rehayem said the industry was overwhelmingly surprised by the results.
“A lot of brokers were surprised to hear that six in 10 non-conforming borrowers are missing out on getting a home loan, and the untapped opportunity that exists there for them to assist those borrowers to receive finance,” Pepper’s director of sales and distribution, Mario Rehayem said.
According to Rehayem, this indicates that many brokers are unaware of the “sheer size and make up” of the non-conforming market.
“[Brokers] were also surprised to hear that Pepper’s research indicates the biggest reason borrowers are classified as non-conforming is because of unusual income, at 33%.”
This dispels the myth that the major reason borrowers turn to alternative forms of finance is due to credit impairment. In fact, according to Pepper’s research, only 20% of borrowers fall into this category. However, the research also reveals that, on average, consumers often have more than one reason for their non-conforming status.
Further, almost four in 10 non-conforming borrowers (39%) apply through a traditional lender and are rejected, while almost a quarter (24%) don’t apply at all because they think they will be knocked back. Sixteen percent of non-conforming borrowers have even been told they can’t be helped at all.
According to Rehayem, this could present a huge opportunity for brokers to add value if they educate themselves on the non-conforming market.
“Borrowers’ needs change all the time – whether this is their own circumstances or external factors – and it’s important brokers understand that a client might be prime one day and not the next,” he said.
“That’s why we are encouraging brokers to educate themselves on the credit policies and niches of specialist lending and specialist lenders, so that if a time comes when one of their clients is no longer suited to a prime loan, they can still continue the relationship, and continue adding value to their business.”